Fantasy Football Tax Implications: What You Need to Know

With the NFL and college football seasons well underway, fantasy football players are in their glory. They have one thing in mind: taking home as much money in the next three months as possible.

It doesn’t matter if you are playing daily fantasy sports or taking part in longer contests, nothing changes the fact that you may win money. If this happens, your tax situation will be changed.

As a taxpayer, there are a few things you need to know. First and foremost, you have to report prizes as income. There is no way around this. Secondly, and just as important, you may be able to deduct some expenses and/or losses.

Pay Taxes on Winnings

Unless you want to play with fire, unless you want to risk an IRS audit, it is best to pay taxes on all prizes. The IRS requires that these prizes be reported as miscellaneous income.

If you win at least $600 in a given year, you will receive Form 1099-MISC stating your total winnings. Just as you receive this form, the IRS also gets a copy.

Note: even if you don’t receive Form 1099-MISC, you should still track all your income from fantasy sports and include this on your tax return (as long as you won more than $600).

Deduct Expenses

You may not consider your fantasy sports hobby a business, but you should think of it as such when it comes to deducting expenses (more on this later). For example, entrance fees can add up over the course of a year.

Here is an example: you enter a fantasy football contest for $500. When everything is said and done, you win $2,500 as a prize. In this case, your net income is only $2,000.

Note: even though you may treat your fantasy sports hobby as a business, the IRS does not feel the same way. This is not business activity.

As a fantasy football player, you want to win as much as possible. You put a lot of time into this, and you hope it will pay off at some point. If you happen to win $600 or more in a year, you must report this income to the IRS. Neglecting to do so could land you in hot water, including an audit and additional fees and penalties.

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